Central banks need govt supervision, says IMF
BERLIN: Central banks should be independent in setting monetary policy but they should also be tasked with monitoring financial market stability under political supervision, said the International Monetary Fund (IMF)'s chief economist.
Olivier Blanchard also told Handelsblatt newspaper's Friday edition that Germany should take on a stronger role in Europe and that it needs to invest more rather than focus on saving.
"If there is one lesson to be learned from the crisis, it must be: it's not enough to keep an eye on monetary stability.
"We must also look at the stability of the financial system," Blanchard was quoted as saying.
"(Central bank) independence should be tiered. Classical monetary policy must remain independent. The control of the financial markets by the central bank, however, should be put under some kind of political supervision."
Blanchard reiterated his call to raise inflation targets to four per cent from the current two per cent, saying that would create space to cut interest rates during crises.
The European Central Bank should consider ways to lower credit costs for small and medium enterprises.
Blanchard said he was concerned that European countries would drag their feet on structural reforms as confidence grew that the worst was over in the eurozone sovereign debt crisis.
"We need further structural reforms if we want to reach an acceptable level of employment." Reuters